Gold flat as multi-year dollar highs offset share fall
London (Sept 29) Gold was little changed on Monday as the negative impact of multi-year dollar highs was offset by unrest in Hong Kong that hit companies exposed to the territory and boosted some demand for the metal.
Spot gold was flat at $1,219.50 an ounce by 1017 GMT, while U.S. gold futures gained $4.40 to $1,219.80 an ounce. Cash prices fell to a nine-month low of $1,206.85 on Thursday, before recovering slightly.
"You can attribute most of the move in through September so far to the dollar," Citi analyst David Wilson said.
"It's macro issues in the driving seat right now and all eyes are on expectations of interest rate hikes in the U.S. sometime into next year, which is pushing the dollar higher."
The dollar hit a four-year peak against a basket of major currencies again on Monday ahead of a series of important economic data, which will culminate in the release of September non-farm payrolls.
As the bigger impact on gold prices could still come from economic data, market players are eyeing U.S. releases to gauge the strength of the economy and its impact on Federal Reserve policy.
Strong economic data could prompt the U.S. central bank to raise interest rates faster and sooner than expected, which could boost the dollar and hurt non-interest-bearing bullion.
The pressure on gold from a stronger dollar was mitigated by a fall in equity markets after Hong Kong riot police advanced on pro-democracy protesters in the worst unrest since China took over the former British colony two decades ago.
Hong Kong shares sank more than 2 percent, while Asian stocks tumbled to a four-month low in earlier trade.
Gold is traditionally seen as an alternative investment during times of political instability.
Some bullion dealers, however, were worried that retail sales in Hong Kong, a hot spot for tourists from mainland China, could take a hit because of the protests, especially during the one-week National Day holiday that begins on Wednesday.
"Yes, there will definitely be some impact on gold retail sales," said Dick Poon, general manager of refiner and dealer Heraeus Metals in Hong Kong.
"Usually there are a lot of Chinese tourists that come to Hong Kong for the holiday and end up buying jewellery, but this time they might be turned off by the protests."
China is the world's biggest buyer of gold and any drop in consumer demand there could undermine any rally in gold prices.
As a gauge of investor sentiment, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 1.20 tonnes to their lowest since December 2008 at 772.25 tonnes on Friday.
Hedge funds and money managers cut their bullish futures and option bets in gold to their smallest since January in the week up to Sept. 23, the Commodity Futures Trading Commission said on Friday.
Among other precious metals, silver fell 0.5 percent to $17.55 an ounce, just above a four-year low of $17.30 hit on Sept. 22.
Platinum rose 0.1 percent to $1,297.75 an ounce, after earlier hitting its lowest since June 2013 at $1,289.90. Palladium gained 1.2 percent at $779.00 an ounce.
Source: Reuters
